Author 



Title 


JK 


lit. _ 

Imprint 

.As 


nnc 


dofQy-3 

'tSSf' 
























Calendar JNo. 89. 


66th Congress, 
1st Session. 


SENATE. 


Report 
No. 99. 


i\A 



RETIREMENT OF EMPLOYEES IN THE CLASSIFIED CIVIL 

SERVICE. 


July 23, 1919.—Ordered to be printed. 


Mr. Sterling, from the Committee on Civil Service and Retrench¬ 
ment, submitted the following 


REPORT. 


[To accompany S. 1699.] 


The Committee on Civil Service and Retrenchment, to whom was 
referred the bill (S. 1699) “A bill for the retirement of employees in 
the classified civil service, and for other purposes” having considered 
the same report thereon with certain amendments and as so amended 
recommend that the bill do pass. 

The amendments are as follows: 

(1) In line 3, on page 2, after the word “include”, insert the follow¬ 
ing: “ American employees of the Panama Canal above the grade of 
laborer, superintendents of United States National Cemeteries, and 
employees under the superintendent of the United States Capitol 
Building and Grounds, and” 

(2) In line 20, on page 3, insert the word “average” between the 
words “employees” and “annual.” 

(3) In lines 2 and 3, on page 12, strike out the words “termination 

of pay for active” and insert in lieu thereof the words “separation 
from the.” > 

(4) In line 9, on page 14, strike out the word “of” after the word 
“date” in said line. 

This bill is identical, except as to a few changes in phraseology, 
with H. R. 3149, which has been reported to the House with a recom¬ 
mendation that the bill “as amended be passed.” 

The only amendment made by the House committee is that which 
brings American employees of the Panama Canal above the grade of 
laborer, and the superintendents of United States National Ceme¬ 
teries, within the provisions of the bill. This amendment, as will be 
seen, is included in the first of the foregoing proposed amendments 
to the Senate bill. 







2 RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 

Your committee is of the opinion that there is urgent need forborne 
just and equitable civil-service retirement legislation. The main 
purposes to be accomplished by such legislation are: 

(1) Greater efficiency and economy in the Government service; and 

(2) A moderate provision for the material welfare of those who, by 
reason of length of service and their inability to longer render full or 
efficient service, are obliged to retire. 

It has long been patent that, in the various administrative branches 
of the Government, employees have been retained long after they 
had, by reason of age and bodily infirmity, ceased to be efficient. The 
law having made no provision for their support in whole or in part 
during their declining years, the heads of departments and bureaus 
have through sympathy kept many aged employees in the nominal 
service of the Government and their names on the pay roll. The real 
work of the position, in such cases, has devolved on other and younger 
employees. This, of course, has resulted in loss to the Government, 
and it would appear that in some cases the equivalent of two salaries 
has been, or is, being paid for that service for which the compen¬ 
sation should have been but one salary. Of course, work done by 
those whose faculties are impaired by reason of age is not as a rule 
efficiently done, and the Government in this respect sustains a loss 
difficult to estimate. 

The system is a vicious one, both from the standpoint of economy 
and efficiency. To the extent that the employee, drawing the regular 
salary which his position commands, is unable to perform fully or 
efficiently the work of the average person in a like position, such 
employee is a pensioner of the Government, and, as above intimated, 
the attention of your committee has been called to many cases where 
the service rendered by the employee was so slight that he is practi¬ 
cally a pensioner to the full amount of his salary. 

While such employees are thus pensioners, the system which permits 
them to be such is not a pension system. The compensation received 
over and above the value of the service rendered is not measured or 
certain; the employee, meanwhile, is harassed by the thought that he 
is subject to dismissal, or with the fear that the sympathy which has 
so far retained him in the service may yield to the pressure in behalf 
of other applicants who, by reason of a civil-service examination or 
otherwise, are deemed eligible. 

The system is unjust to the head of a department or bureau charged 
with the responsibility of the efficient and economic management of 
the business of such department or bureau. Few would say that the 
human sympathy which retains the aged employee after his usefulness 
is gone in whole or in part is not without commendation, and yet the 
public demands, and rightfully, that the public business be conducted 
both economically and efficiently. Again and again have heads of 
departments recommended that a law be enacted which would require 
retirement at a given age and, at the same time, make such just 
provision for the material needs of the retired employee as will 
secure him against actual want. 

Any system which permits the public business to be carried on 
without fulfilling this requirement is unjust to the public. 

Further, it is unjust to the employee. He has given the best part 
of his life to the service of the Government and, in most cases, on a 
salary out of which he is unable to provide anything like a compe- 


RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 3 


tency for his old age. Meanwhile, the Government has been the 
beneficiary of his continuous service during all his capable years, and, 
as a matter of simple justice and humanity, should contribute not 
all that may be required, but something, to his support when he can 
no longer serve. 

In corroboration of the foregoing, your committee calls attention 
to the following from the report of the Civil Service Commission for 
the year 1917, found at page 15 of the hearings: 

The increased demands upon the personnel of the civil service by the war have 
given emphasis to the need of a retirement system. It is too costly to continue the 
aged and infirm in positions requiring alertness and vigor, especially where they have 
supervision of other employees, and a retirement system is possible which would ba 
alike in the interests of the Government and of the worker. While inefficiency is a 
just cause for removal, appointing officers naturally hesitate to dismiss old employees 
who have become incapacitated after rendering long and efficient service, and a 
virtual pension system thus exists * * *. 

A retirement system would give stability to the service, create an inducement to 
capable men to continue in it, contribute to improved administrative methods, and 
make possible a standardization of salaries and other needed reforms. The benefits 
to the service from an equitable retirement system would justify a direct contribution 
from the Public Treasury to create an annuity for superannuated employees in the 
service at the time the system is established. 

Further, Mr. Galloway, the member of the Civil Service Commis¬ 
sion who was present and submitted the foregoing from the com¬ 
mission’s report, had this to say: 

Senator Colt. But as a matter of principle, Mr. Galloway, as affording the best 
retirement bill, do you think that it would be better for the employee to contribute 
all? In other words, do you not think possibly some burden ought to be thrown upon 
the Government? 

Mr. Galloway. Yes; I think that the Government should bear part of it. 

The Chairman. In justice to the employee? 

Mr. Galloway. I think that a man or woman who has given their life, you might say, 
to a service, not only the Government service, but the service of the Pennsylvania 
Railroad, for instance, or any institution or establishment, should in a measure be 
compensated by that establishment, and I think it would be economy for our Govern¬ 
ment to put up one-half of the money right now to begin a retirement system at once. 

In this connection, attention is called to the remarkable statement 
made by Mr. Paul F. Myers, Chief Clerk of the Treasury Department 
(p. 69 and 70, hearings): 

There are a large number of employees in the Treasury Department, I should say, 
roughly speaking, about 1,000 employees, who have reached the age where they are 
no longer rendering first-class service to the Government. Some of them are rendering 
90 per cent efficient service, some of them 50 per cent, some of them 25 per cent, and 
a few practically nothing, and officials of the Government and officials of the Treasury 
Department, and, I think, that is true of all departments, feel that it is inhumane to 
drop these people from the rolls for the reason that they would be forced to depend 
upon public charity for support. 

In the Treasury Department there are approximately 32,000 employees in Wash¬ 
ington and 25,000 employees in the field service, and I believe that if a measure 
giving adequate provision for retirement is passed probably 1,000 people will be 
affected, and that 250 people can probably do the work that this 1,000 people are 
doing now. 

Secretary Baker, in his statement made before the committee said, 
among other things: 

I think that the public service should be put upon a dignified basis so that it would 
mean not only just compensation during the period of active service, but that it would 
provide a system of retirement which will enable that same employee who has given 
full service to the Government to have enough to live upon in a very modest way 
for the remaining years of his life. Every consideration that I can think of, humani- 


4 RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 


tarian, toward the employee, and the good of the service so far as the Government 
itself is concerned, so far as getting the best type of employees, and getting the' best 
service out of those we have, dictates, I think, the necessity of some sort of retirement 
provision for the employees in the public departments. 

The plan contemplated by the bill is what is known as the partially 
contributory plan, under which the Government and the employees 
respectively contribute a portion of the amount required for the pur¬ 
chase of a stated annuity. Whatever may be the ultimate conclu¬ 
sion, it is certain that, at the present time, the straight pension plan, 
aside from the support it would find among employees, would not 
have the approval of the general public. It is conceded that it 
would be a great burden upon the Government. The employees 
themselves now realize the situation and, in order that there may be 
relief from present conditions, are ready to contribute a just propor¬ 
tion of the amount which will serve to create an annuity on 
retirement. 

While the wholly contributory plan, under which the employee 
would, through deductions from his salary, contribute the whole of 
the amount necessary to create such annuity, may yet have some 
earnest advocates, it is manifest that, under conditions as they have 
existed during the last few years and as they are likely to continue 
with reference to salaries paid by the Government and the expenses 
of living, this plan would mean a great hardship to the employee and 
is one which a just Government should not require. Mr. Beach in 
his testimony, referring to a bill before the Senate at the last session, 
which provided for a wholly contributory plan, has this to say: 

My criticism of this bill is that no person knows the amount which the employees 
will be required to contribute. It says that the annuity shall be based upon such 
annuity tables as the Secretary of the Treasury shall direct. Now this bill, or one of 
similar import, has been pending in the Congress for several years and yet, up to the 
present time, I have failed to find anything that gives any reliable estimate as to 
what the amount of contribution will be required of the employees under this plan. 

He then gives the estimate of Mr. Herbert D. Brown, Chief of the 
Bureau of Efficiency, as to the assessments necessary to purchase 
annuities under the wholly contributory plan. These would be 
approximately as follows: 

Age 20—3 per cent. 

Age 25—4 per cent. 

Age 30—5 per cent. 

Age 35—6 \ per cent. 

Age 40—8 per cent. 

Proceeding, Mr. Beach says: 

Without going further into detail, I desire to submit as my personal opinion that 
an assessment of 8 per cent from any employee in the United States Government at 
this time would be inequitable. (Pp. 97 and 98 of hearings.) 

and such is the opinion of your committee. 

The bill considered by your committee is, in all its essential features, 
the result of an agreement reached by a conference committee repre¬ 
senting all the various branches of the classified civil service in the 
United States. It represents many concessions and compromises. 
It involves apparent sacrifices on the part of the higher salaried 
employees who, on the 2 \ rate per cent of contribution fixed by the 
bill, must necessarily pay a larger proportionate amount for the 


RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 5 

creation of their annuities than do those with smaller salaries. Of 
course, they are somewhat abler to do this, hut the worthy motive 
behind the concession they make is their desire to do justice to all. 
They see the urgent need of a retirement law and, for the sake of the 
cause, are willing to forego the larger annuities to which their larger 
contributions might entitle them. 

The hill makes the ages of retirement respectively, 65, 62, and 60 
years, depending, as will be seen, upon the nature of the employment, 
with a provision for continuance in the service beyond the retirement 
age in case the employee is efficient and willing U> serve for successive 
two-year periods upon certification of fitness for service by the head 
of the department. 

Section 2 of the hill defines the classes and rates to be used as a 
basis for computing annuities, and the annuities are graduated, both 
in relation to the number of years in the service and to the average 
annual salary based on compensation during the last 10 years of 
service, with a maximum and a minimum annuity for each class. 
No annuity shall exceed $720, or be less than $180 per annum, nor 
shall any annuity be granted for less than 15 years of service. The 
following is a copy of the sample table of annuities submitted by Mr. 
Beach to the committee: 


Sample table of annuities. 


Average annual salary, pay, or 
compensation. 

Class A, 
30 years 
or more, 
60 per 
cent. 

Class B, 
27 to 30 
years, 

54 per 
cent. 

Class C, 
24 to 27 
years, 

48 per 
cent. 

Class D, 
21 to 24 
years, 

42 per 
cent. 

Class F, 
18 to 21 
years, 

36 per 
cent. 

Class F, 
15 to 18 
years, 

30 per 
cent. 

$1,200 or more. 

$720 

$648 

$576 

$504 

$432 

$360 

$1,100. 

660 

594 

528 

462 

396 

330 

$1,000. 

600 

540 

480 

420 

360 

300 

$900. 

540 

486 

432 

378 

324 

270 

$800. 

480 

432 

384 

336 

288 

240 

$700. 

420 

378 

336 

294 

252 

210 

$600 or less. 

360 

324 

288 

252 

216 

180 


The bill gives the employee the benefit of all periods of service, so 
that one who has been in the civil service, though not classified, or 
in the military or naval service, may be credited with the period of 
such service and will be eligible for assignment under the provisions 
of section 2 of the bill. 

The bill provides for the administration of the act by the Commis¬ 
sioner of Pensions, under the direction of the Secretary of the Interior. 
It is believed that the Bureau of Pensions is better equipped both in 
personnel and in the facilities afforded by the Pension Building for 
the administration of the law than any other bureau of the Govern¬ 
ment. 

One distinctive feature of the bill is the provision made for retire¬ 
ment on account of disability arising from disease or injury. The 
same period of service of 15 years, before the totally disabled employee 
can share in the benefits of the act, is required. This provision for 
the disabled appeals to the committee as being most just, and the 
same is carefully safeguarded by the medical examinations required 
on retirement for disability and subsequent thereto. 



















6 RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 

Such portions of the fund called the “ Civil Service Retirement and 
Disability Fund’ 7 as may not be at once required for the payment of 
the annuities and refunds provided for in the bill are to be invested 
from time to time by the Secretary of the Treasury in interest-bearing 
securities of the United States, and the income from such investments 
is to constitute a part of said fund for the purpose of carrying out 
the provisions of the act. 

Provision is made for those cases where an employee leaves the 
Government service before reaching the retiring age. He may with¬ 
draw the total amqunt which has been deducted from his salary, 
with interest compounded at 4 per cent. In case an employee dies 
before reaching the retirement age, the total amount of deductions, 
with accrued interest, shall be paid to the legal representatives of 
such employee. In case an annuitant dies without having received 
an amount in annuity equal to the deductions from his salary, the 
excess of the accumulated deductions over the annuity payments 
shall be paid to his legal representatives. 

The foregoing calls attention to the essential features of the bill, 
and further discussion is deemed unnecessary. The committee, 
however, submit herewith the estimate of cost submitted at the 
hearing before the House committee by Mr. Beach of the Pension 
Bureau. 

The estimate shows the contributions from employees for each of 
the first 10 years of operation under the law and the available surplus 
for each of said years. It will be seen that in the tenth year, there 
is yet left a small available surplus and that it will not be until after 
the expiration of 10 years from the time the act goes into effect that 
the Government will have to contribute anything toward the pay¬ 
ment of annuities; but, after 10 years, Government contributions 
will begin and will gradually increase until the Government’s con¬ 
tribution will be from 60 to 65 per cent and the employees’ contribu¬ 
tion will be from 35 to 40 per cent of the amount of the annuity. 
The estimate furnished by Mr. Beach is, however, based on salaries 
as paid in 1916. Since that date salaries have advanced, and the 
larger salaries will mean larger contributions. The committee 
believe that with such larger contributions on the part of employees 
the time will come in the course of 25 years, or even less, when the 
proportionate contributions of Government and employees will be 
practically on a half-and-half basis. 

Estimate of cost of retirement under the provisions of the Lehlbach bill (H. R. 3149), 
assuming there are 300,000 employees in the classified civil service and that 6,400 
will retire at once, 1,000 will retire each year during the next five years, and 500 
each year during the next four years. Contributions are figured at the rate of 2 \ per 
cent on the average annual salary of $1,138. Refunds are estimated on average 
contributions. 


First year: 

Contributions from 300,000 employees. $8, 535, 000 

Annuities for 6,400 annuitants, at $610 each.$3, 904, 000 

Refunds to 20,000 employees separated from the service. 274, 500 

- 4,178,500 


Surplus. 4,356,500 









RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 7 


Second year: 

Available surplus. $4, 356,500 

Contributions. 8,535,000 


Total. 12,891,500 

Annuities from 7,400 annuitants, at $610 each.$4, 514. 000 

Refunds to 20,000 employees separated from the service. 549, 000 


Surplus. 7,828,500 


Third year: 

Available surplus. 7, 828, 500 

Contributions. 8, 535,000 


Total. 16, 363, 500 

Annuities for 8,400 annuitants, at $610 each.$5,124,000 

Refunds to 20,000 employees separated from the service. 823, 500 

- 5, 947. 500 


Surplus. 10,416, 000 


Fouth year: 

Available surplus. 10.416,000 

Contributions. 8, 535,000 


Total.,. 18,951,000 

Annuities for 9,400 annuitants, at $610 each.$5, 734, 000 

Refunds to 20,000 employees separated from the service. 1,098,000 

- 6, 832,000 


Surplus.. 12,119,000 


Fifth year: 

Available surplus. 12,119,000 

Contributions. 8, 535,000 


Total. 20,654.000 

Annuities for 10,400 annuitants, at $610 each.$6, 344,000 


Refunds to 20,000 employees separated from the service. 1,372, 500 

- 7,716. 500 


Surplus... 12,937,500 


Sixth year: 

Available surplus. 12,937, 500 

Contributions. 8, 535,000 


Total. 21,472,500 

Annuities for 11,400 annuitants, at $620 each.$7,068, 000 


Refunds to 20,000 employees separated from the service. 1, 647, 000 

-8, 715, 000 


Surplus... 12, 757, 500 


Seventh year: 

Available surplus.*..’. 12, 757, 500 

Contributions. 8, 535,000 


Total. 21,292,500 

Annuities for 11,900 annuitants, at $620 each.$7, 378, 000 

Refunds to 20,000 employees separated from the service. 1, 921, 500 

-- 9,299,500 


Surplus. 11, 993,000 





























































8 RETIREMENT OF EMPLOYEES IN CLASSIFIED CIVIL SERVICE. 


Eighth year: 

Available surplus. $11,993, 000 

Contributions. 8, 535, 000 


Total. 20,528,000 

Annuities for 12,400 annuitants, at $620 each.$7, 688, 000 

Refunds to 20,000 employees separated from the service. 2,196, 000 

---— 9, 884, 000 

Surplus. 10,644,000 


Ninth year: 

Available surplus... 10, 644, 000 

Contributions. 8, 535, 000 


Total.... 19,179,000 

Annuities for 12,900 annuitants, at $620 each.$7, 998, 000 

Refunds to 20,000 employees separated from the service. 2, 470, 500 

- 10,468, 500 


Surplus. 8, 710, 500 


Tenth year: 

Available surplus. 8, 710, 500 

Contributions. 8, 535, 000 


Total. 17, 245, 500 

Annuities for 13,400 annuitants, at $620 each.$8, 308, 000 

Refunds to 20,000 employees separated from the service. 2, 745, 000 

- 11,053,500 


Surplus. 6,192, 500 


Estimated average annuity for the first year. $610 

Estimated average annuity will increase each year until it reaches. $660 

Estimated number of employees in the preferential classes between 60 

and 65 years of age. 3, 600 

Estimated number of employees in all classes over 65 years of age. 9, 200 

Total eligible for retirement. 12, 800 

Estimated number to retire at once. 6, 400 

Estimated number of annuitants at the end of 10 years. 13, 400 

Estimated maximum number of annuitants on a basis of 300,000 in service 26, 000 

Aggregate annuities for 26,000 annuitants at $660 each. $17,160, 000 

Refunds to 20,000 employees separated from the service annually, as¬ 
suming they have contributed on the average for 10 years. $5, 490, 000 

Total disbursements annually. $22, 650, 000 

Total contributions from 300,000 employees receiving on an average 

$1,138 annually at 2 \ per cent. $8, 535, 000 

Employees’ contribution.percent 37.7 

Government’s contribution.do_ 62. 3 • 


o 







































































































































































































































